HDFC Bank may reduce lending rate soon

Taking a cue from the country’s largest lender, State Bank of India (SBI), which cut its base rate by 25 basis points (bps) on September 18, HDFC Bank, India’s second largest private bank, has said it might also slash the minimum lending rate.

“The broad principle is when costs goes down, interest rates will also go down. The Asset Liability Committee (ALCO) will decide by how much the base rate will go down,” said managing director Aditya Puri, on the sidelines of an event here.

The base rate of HDFC Bank currently stands at 9.8 per cent, a mere five basis points above SBI’s 9.75 per cent. SBI announced the rate cut decision last Tuesday, a day after the Reserve Bank of India slashed the cash reserve ratio (CRR) by 25 bps to 4.5 per cent on September 17. CRR is the portion of their money banks are required to park with the central bank.

Puri agreed there would be some pressure on net interest margin (NIM) but it will remain in the range of 4-4.2 per cent. As on June 30, the NIM of the bank stood at 4.3 per cent.

Credit growth in the banking system has been slow during this financial year for the banking system. But for HDFC Bank, the scenario has been different. “We are one of those few banks which has 50 per cent plus exposure in consumer loans. We are also into working capital loans. So, the slowdown has come for those who are lending to infrastructure, state electricity boards, finance companies and real estate,” said Puri.

According to him, the banking system saw slowdown because large sections which were consuming credit earlier had stopped. “The slowdown would have been more if oil companies were not borrowing so much.”

But Puri expects some improvement in the scenario in the time to come. According to Puri even deposit growth in the banking system has been slow because money supply growth has been slow.

Meanwhile, HDFC Bank on Tuesday launched Diners Club credit cards in India. The cards are available in three different variants — Black, Premium and Rewardz. The card holders would have direct free access to the Diners Club Airport Lounge Program spread over 450 lounges worldwide, the bank said in a statement.

Said Parag Rao, business head, credit cards, HDFC Bank: “For us, it’s something that will further enforce HDFC Bank’s position as the nation’s premier card issuer, one that the country’s rich prefer.”

The cards are targeted towards high net worth individuals (HNIs). The Black variant is the most exclusive card ever launched by HDFC Bank.

Diane Offereins, president, payment services, Discover Financial Services said: “We recognise the importance of India as a key emerging market and are eager to expand the Diners Club brand in this region.” Diners Club earlier had a partnership with Citibank however it was discontinued in 2008.